Physical Inventory 101

1. Physical Inventory 101 By Marla Williams, CPPM President, Integrated Asset Management, Inc. Executive Vice President, Federal Center Chapter

2. What is a Physical Inventory? • Verify that your records match the actual physical conditions • Includes: • Identifying property that is not currently in the system • Identifying assets that are no longer needed by the organization.

3. Loss Rate • What loss rate is acceptable? • Typical acceptable loss rates are between 0.5 and 5%. • Weapons, hazardous materials, laptop computers with sensitive information may have a zero acceptable loss rate. • Low cost items may have acceptable loss rates as high as 20%.

4. High loss rates = poor property management • Cost and effort to replace the item • Lost productivity • Release of company-sensitive or personal info • Danger to the individual, the community or the organization

5. What is included? • Capital Assets • Accountable or Controlled Assets • Sensitive Assets

6. Capital Assets • Not Purchased for Resale • Useful Life of Over One Year • Acquisition Cost Greater Than Threshold • $5,000 to $300,000, depending on size of organization • Usually represents 80% of total asset value • Reported on financial statement • Any additions or changes must be noted on annual statements • Ultimate responsibility of the Chief Financial Officer.

7. Accountable Assets • Purchase cost less than Capitalization Threshold • Items that may be vulnerable to theft • Computers or PDA’s with personal or sensitive information • Hazardous material • Weapons • See ASTM E2608 Standard – provides Equipment Control Matrix

8. Who Should Do the Inventory? • Inventory is an audit • Needs to be performed by individuals who have no vested interest in the outcome. • Use: • third party vendor • headquarters personnel • teams from another location

9. What Tools Should You Use? • Over 1,000 assets, should justify investment in automated inventory tools: • Commercial Off-the-Shelf (COTS) Single Workstation System with one HandHeld Computer <$10,000 • COTS Multiple Workstation System over a network with two HandHeld Computers $20,000-$25,000 • Oracle or SQL-based system with customized screens and interfaces to suit your specific needs $250,000+

10. Handheld Computers • Old handhelds had proprietary operating systems and limited memory • New handhelds are portable computers running Windows Mobile or CE operating systems: • Can read RFID, UID codes or bar codes • Allow multiple configurations or prompts • Run multiple applications (e.g. work orders, preventative maintenance, etc.)

11. Automated Identification • Linear Bar Codes • Most common and affordable • UID • DOD Program for Equipment over $5,000 • 2d matrix codes and linear bar codes assign unique identification numbers to serialized equipment • Purchase Information is sent to a National Registry • Benefit to non-DOD. . .

12. Automated Identification • RFID • Tags can be passive or • active • Inventory with Handhelds • or Fixed Station Scanners • Fixed Scanning at Loading Dock, Entrances, and Hallways makes collection automatic but can be expensive • Consider for server rooms or areas that contain sensitive or hazardous materials • Not a “real” security measure unless hidden inside equipment • Cost Effective for High Volume Supply Chain Management Applications like Wal Mart

13. Make an Inventory Plan • Project Manager should develop a detailed Inventory Plan and share it with all interested parties • Inventory personnel • Employees • Security personnel • Management

14. Inventory Plan • Main Contact • Available during work hours • Location Contact or Custodian • Access Cards/Security Badges • If escorts are required, how many? • Procedures for Locked Rooms • Maximum Number of Returns to Location

15. Inventory Plan • E-mail or Flyer to Employees • Ask for complete cooperation • Instruct employees to remove property from overhead compartments, desk drawers and storage closets and leave the items out until inventoried. • Give employees a contact name and telephone number for questions. • Provide copies of the e-mail to the inventory team - to reduce interruptions.

16. Inventory Plan • Bar Code Label Supply • Consider pre-printed labels or print your own

17. Inventory Plan • Bar Code Labels for Locations • Some systems use bar code room tags to identify locations. • Floor Plans with Location Names and Organization boundaries • Assign location names to workstations/cubicles

19. Inventory Plan • Condition Codes • Consider using GSA Codes • Put them in writing • Give Examples • Ask for specific damage information

20. Inventory Plan • Status Codes • IU-In Use • IS-In Storage (available for use by another) • EX-Excess to be turned in

21. Inventory Plan • Strategy for Laptops, PDA’s, Cellphones • E-mail known owners • Create Flyer for inventory team to leave • Host doughnut stations at elevator banks • Create Mail In Packages for Remote users • Don’t Forget Federal Continuity of Operation Assets (COOP)

22. Inventory Plan • Laptops and Docking Stations • Many users are not familiar with proper undocking procedures • Check with IT Department for proper “undocking” procedures • Consider assigning special IT Help Desk person to assist with docking issues during inventory • Leave flyer with Help Desk contact at each station when finished

23. Inventory Plan • Strategy for Vehicles • Station Inventory personnel at Centralized Maintenance or Fueling Locations • Use fuel card system data • Organize special inventory times that minimize disruption

24. Inventory Plan • Catalogs keep descriptions uniform and consistent • Identify Categories and Classifications • Basic Types (e.g. PC-Desktop, PC-Laptop) • Manufacturer Names • Model Numbers, Part Numbers • Dimensions (Floor Standing Equipment, Furniture) • Furniture Attributes (Color, Material, Finish, etc.) • Document Catalog Development Guidelines • Determine Process for Adding New Catalogs

25. Inventory Plan • Digital Images • Linked to Catalog/Asset • Can be done with $100 digital cameras • Place sign in photograph with number to allow you to rename later • Can be dry eraser boards with magnets/velcro or pre-printed numbers generated in Excel in a large font printed on plain paper • Some companies use cameras that will allow them to assign the name in the camera

26. Inventory Plan • Standardize Tag Placement Guidelines • Keep it simple • Use photographs to illustrate • How will it look? • Is the tag easy to remove or tamper with? • If locked, can I access the tag? • If moved, will it block the tag?

27. Inventory Plan • Training • If Contractor is using your equipment, be sure they have been adequately trained • Consider train the trainer sessions for handhelds • Consider detailed scripts for inventory personnel • Flyer to Leave for Employees Who Are Out • Set Progress Goals and Monitor Them • How many assets will be inventoried each day? • What level of accuracy should we find during auditing? • Are we on target to meet our completion deadline?

28. Inventory Process • Ideally, wall to wall inventories should be conducted building by building, floor by floor, room by room • Rooms should be inventoried sweeping from left to right, right to left or some consistent pattern • If done by Organization or Custodial Officer, may miss items or whole room/areas not previously recorded – suggest tracking carefully on master floor plans

29. Daily Process • Uploads • Equipment failures or accidents could lose hours or days of valuable work if not transferred • Enter New Catalogs • New catalogs should be entered immediately to reduce duplications and keep descriptions uniform • Update Master Floor Plan • Master Floor Plan should be updated to reflect each team’s work, locked rooms or unusual conditions

30. Daily Auditing • Run Reports by Location • Randomly audit 5% of each inventory team’s work – catching problems while they are small . . .

31. Daily Meetings • PM posts each team’s counts and reasons for daily gains and losses • PM meets with teams at the end of each day: • to receive feedback from teams about their progress • review previous days audit results • share productivity gains or losses • Go over information about changes in schedule, etc.

32. Interim Reconciliations • Run Exception List of Items Not Found by previous location • Send Inventory Personnel back • Update inventory data • Run Exception List of Items Not Found by Organization and Location • Send list to the Accountable Organization for further research • Third Party should verify items found

33. Final Reconciliation • Reconcile all assets inventoried by tag • Does the system look for duplicate Serial Numbers? • Look for Serial Number matches between: • List of All New Assets Tagged • Exception Listing of Items Not Found • Update reconciliation

34. Final Reports • Run several reports or spreadsheets: • All New Items Tagged by Organization • All Items Not Found with Purchase Cost by Organization • All Items Found with Purchase Cost by Organization

35. Results • Measure annual overage or loss rates by overall number and value • Also makes these calculations for each Organization • Also calculate these values by category of equipment • Compare new information to previous losses/gains for trend

36. Investigate Generally, if the total value of your losses are in excess of 5% Or you have an Organization with losses in excess of that rate, further investigation is required.

37. Now its up to you! You can just rely on the physical inventory to maintain accuracy and continue to get the same results, or worse, or you can look at the physical inventory as an opportunity to make improvements in the property management process

38. Questions? Marla Williams, CPPM President Integrated Asset Management, Inc. marla@weinventoryassets.com (800) 731-9569 Millersville, Maryland